Insurance as an Investment Strategy

Do you want to find out about the Living benefits of Insurance?

If the word “life-insurance” sounds very boring to you then I will give you some interesting facts about Insurance policies and may be by the end of the article you will figure out a way to make money via life insurance. We all know that there are death benefits of Life Insurance but in this blog I will try to explain the LIVING benefits of Life insurance.

Can we use Insurance to make money?

The answer is yes, however, the truth is not that simple. I will try to share things I researched about Whole life insurance policy and the part where you can use it to make money.

An insurance policy is an agreement between two parties (the Insured and the Insurer). As per this agreement the Insurer agrees to offer financial protection against any potential losses that the insured may face. This agreement is also referred as an Insurance coverage. This agreement has some terms and conditions under which the insurer agrees to provide financial compensation to the insured in the event of the covered losses.

In my today’s article I am going to discuss about the WHOLE Life Insurance and after some time I will write more about other insurances too.

When I was researching about it, I found that people are using whole life insurance in many ways. I had a lot of questions around it like:

What is whole life insurance?

Can we invest in Whole life insurance? 

Can we use it for your real estate investment? 

Can we use it in our business?

Is it good or bad?

My intention behind researching and reading about life insurance was to find out if there is a way to use whole life insurance policy to make money, like really getting rich.

A whole life insurance policy provides coverage for the life of the insured, pays a death benefit and it also has a savings component in which cash value may accumulate. These whole life insurance policies are known as Permanent or Traditional life insurances.

It means that it’s a PERMANENT Life insurance, so you have to pay the premium till the time you are alive. You don’t have to worry about renewing your policy or fluctuating premium payments. A portion of the premium paid is invested to build up cash value over time. A policy holder can use this cash value for various purposes like investing into any venture, real estate, or building any other asset, you can even pay your premiums. Out of many insurance policies I researched about whole life insurance policy has Death benefits and Living benefits both.

Is it a borrowing against Life Insurance?

Yes, it is a borrowing against your whole life insurance. You have to keep the below points before borrowing:

• You can take loan from your insurer using the cash value of your policy as collateral.
• The repayment of the loan is flexible.
• The interest charges mean that your policy’s payout can drastically go down.
• Before you can take loan give your policy 10 years or more to build up enough cash value to borrow from.

**Note – Be careful when borrowing against life insurance as it may not be the best use of life insurance for everyone.

Borrowing Money:

Before you plan about borrowing money from your Life Insurance policy, there are few things you should know.

Please remember and I want to stree on do not forget the Primary reason for a whole life insurance policy is to provide a protection to your loved ones and Borrowing against your life insurance policy is an option. If your primary reason to take a whole life insurance is to borrow against your policy please reconsider it. 

By the end of this article I hope you will be able to figure out if it is for you or not. During my investigation I realized that it isn’t for everyone. It does come with some additional features like the loan component but through this article please don’t forget the main purpose of the life insurance is still to protect your loved ones. (I am sorry for reiterate the primary purpose of the insurance)

Borrowing against the whole life policy is an amazing feature. The cash value component makes these types of policies usually more expensive than a normal term life insurance policy. I mean the premiums can be 5 to 15 times more than a term life insurance policy.

Before I proceed and explain when you can borrow, what’s the interest rate, how much you can borrow and how to pay back the borrowed money lets quickly recap what we have read so far:

• We can borrow money against life insurance, if we have a Whole life insurance policy.
• The loan is taken out based on the cash value of your policy.
• Repayment of the loan is flexible; however, it can impact the payout of the policy.
• Give your policy 10 years or more to build sufficient cash value to borrow from.
• Premium of a whole life insurance policy is considerably more than a normal term life insurance policy.
• ***Do not forget the primary purpose of an insurance policy is to give protection to your loved ones and borrowing against your policy is an added feature of Whole life insurance.

When can we borrow?

This depends on the policy’s terms, however, I have observed that most insurance companies have mentioned that give your policy 10 years or more to accumulate sufficient cash value to borrow from.

At what interest rate we have to repay the loan?

It depends upon the terms and conditions of the policy and the also on whether your interest rate is variable or fixed. Based on what I have read on many insurance companies the rate for borrowing against life insurance is usually between 5-8%.

How much can we borrow?

Most of the insurance companies allow us to borrow up to 90%. It can be lesser than 90% but I have seen that the upper limit is usually 90%. This limit on borrowing is different for every insurance company.